Cabinet refuses to allow SNGPL recovery of Rs 73 billion

Aftab Ahmed

Islamabad: The Cabinet members have opposed a plan of putting a burden of Rs 73 billion on account of diverting expensive RLNG by Sui Northern Gas Pipeline Limited (SNGPL) to domestic consumers in a bid to overcome the gas crisis in the winter seasons.

SNGPL faced a revenue shortfall of Rs73.8 billion due to the diversion of RLNG to the domestic sector, especially in the last two winter seasons.

Economic Coordination Committee (ECC) had approved earlier to recover Rs 73 billion from those consumers including CNG, power, and industry consuming RLNG. However, the cabinet did not ratify the decision following the opposition of the cabinet members.

The SNGPL had managed to overcome the gas crisis and faced a revenue shortfall of Rs 73 billion due to the diversion of expensive imported gas to domestic consumers in the last two winter seasons.

https://newztodays.com/pd-asks-ogra-to-recover-rs-76b-lng-bill-of-sngpl/

At present, the Oil and Gas Regulatory Authority (OGRA) notifies the re-gasified liquefied natural gas (RLNG) sale price for SNGPL on a monthly basis whereas natural gas prices for domestic consumers are revised after every six months.

Moreover, there is no mechanism in place at present to recover RLNG prices from domestic consumers.

The gas sale price for domestic consumers is Rs350 per unit but SNGPL has provided RLNG to them at a cost of Rs1,700 per unit, which led to the accumulation of a tariff differential of Rs73 billion.

The cabinet members were briefed that though the decision to allow SNGPL to inject RLNG for consumption of domestic and commercial consumers in winters to manage the load was taken by the previous government the practice continued during the present government.

Due to the ring-fenced pricing policy of RLNG and indigenous gas, the financial impact of one could not be recovered from another. As a result, more than Rs 70 billion shortfalls had accumulated. There was no option but to allow SNGPL the recovery of the shortfall from the consumers which would translate into the increased tariff.

The revenue shortfall compounded the impact of a reduction in gas supply from different fields with the Covid-19 outbreak, which compelled SNGPL to divert RLNG to meet demand from domestic and commercial consumers from March 2020 onwards. The tariff differential is subject to change based on actual volumes diverted in the winter and summer months and the recovery of shortfall during the months.

The Petroleum Division said it was of the considered view that due to the severity of weather in the past winter season, SNGPL was constrained to inject RLNG into the system to meet demand from domestic and commercial consumers, which compounded the problem in the absence of a recovery mechanism whereas, under the RLNG ring-fenced pricing, an arrangement for the recovery of RLNG-related shortfall can only be made through a monthly pricing mechanism.